Banks continue to help fund the economy while the capital market struggles to improve its footprint financing businesses.
The role of banks had diminished in the past two years due largely to the fast-pace stock market, but new data suggest an increasing reliance on lenders.
Total funds made available by money and capital markets was 28,530 trillion rials ($107 billion) in the first ten months (March 20-Jan. 20) of the fiscal year.
The figure indicates 63.7% rise compared with the same period last year with lenders making a bigger contribution to growth, the Tehran Chamber of Commerce, Industries, Mines and Agriculture said in a report, citing data by Central Bank of Iran and the Securities and Exchange Organization.
Lenders accounted for 49.1 percentage points of the annual growth in total finance while the capital market represented a 14.6-percentage-point growth.
Lenders injected funds through loans while capital market financing was via bonds and issuance of new shares by listed companies.
Banks pumped 22,950 trillion rials ($86b) into different economic sectors with 80% share of the total funding -- 59% higher on the corresponding period last year.
Total funds made available by money and capital markets was 28,530 trillion rials ($107 billion) in the first ten months (March 20-Jan. 20) of the fiscal year
Approximately 5,580 trillion rials ($21 billion) was made available to companies via the capital market in the ten months – up 84% on the same period a year ago.
Equity financing and debt financing are the two main types of financing in the capital market. Equity financing is the method of raising capital by selling stocks while debt financing is when a firm raises money by selling debt instruments to individuals and institutional investors.
Raising capital via revaluation of assets accounted for 60% of the capital market finance. In addition, companies raised funds through IPOs to the tune of 94 trillion rials ($354 million) – a steep decline of 66% compared to the 280 trillion rials ($1b) in IPOs in the first ten months of the previous fiscal year.
IPOs accounted for 1.7% of the total finance made available by the capital market in the period.
Government and corporate bonds accounted for 37% of the total funding by the capital market. Bond issuance by banks included 1,810 trillion rials ($6.8b) by the government (including treasury bills and Islamic bonds sold to finance the budget), 183 trillion rials ($690m) in corporate bonds and 71 trillion rials ($270m) Productive Credit Certificate (known by its Persian acronym Gam).
Gam is a market oriented financial instrument traded in money and capital markets. Through this instrument lenders help businesses by offering a tradable credit certificate similar to LCs.
